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A better-than-expected third quarter and bullish guidance helped

Penn National Gaming

(PENN) - Get Free Report

shares avoid the selloff afflicting the gambling sector.

Most other casino stocks slumped on continued general investor pessimism exacerbated by analyst downgrades Thursday on

Harrah's Entertainment

( HET),

MGM Mirage

(MGM) - Get Free Report


Wynn Resorts

(WYNN) - Get Free Report


Boyd Gaming

(BYD) - Get Free Report


The Dow Jones U.S. Gambling Index was down 1.7% late in the session.

Penn National went counter to the trend, its shares rallying $1.32, or 5%, to $27.62, as the company's third-quarter report offered enough positives for investors to shrug off a downgrade from KeyBanc Capital Markets.

The Wyomissing, Pa., casino operator reported third-quarter earnings of $55.4 million, or 64 cents a share, up from $17.2 million, or 21 cents a share, a year before.

During the quarter, Penn National incurred $19.1 million of pretax expenses related to Hurricane Katrina but recorded an after-tax gain of $35.6 million from the sale of the Hollywood Casino-Shreveport.

Excluding those items, Penn National had adjusted earnings of 37 cents a share, well ahead of the 31-cent average Wall Street estimate from Thomson First Call.

Revenue was $294.6 million, up from $288.6 million a year before but less than the $297.1 million consensus forecast.

Although Hurricane Katrina damaged Penn National's Casino Magic-Bay St. Louis and Boomtown Biloxi casinos, its properties elsewhere delivered strong results, particularly its Baton Rouge casino, which saw a spike in traffic in the aftermath of the hurricane.

The Charles Town, Hollywood Casino-Aurora and Casino Rama all saw double-digit percentage increases in earnings before interest, taxes, depreciation and amortization, or EBITDA.

Penn National's results didn't include the acquisition of

Argosy Gaming

, which was completed on the first business day of the fourth quarter.

The company's guidance also encouraged investors. Penn National expects fourth-quarter adjusted earnings of 42 cents a share, ahead of the 38-cent consensus. For the full year, Penn National forecasts a profit of $1.48 a share, up from its previous guidance of $1.30 and better than the $1.40 analyst consensus.